- Arpitha Prasanna, Balraj Ramar, Tanuj Khajuria
- November 11, 2021
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Research Methodology
- The OLA corporate considered in the study is limited to all vertical portfolios from OLACABS(ANI Technologies). The OLA electric bike business is not considered as direct OLA corporate portfolio.
- OLA is a private limited company. The company reports like financial reports are not available in the market.
- We have tried to leverage the various framework and concepts from the corporate strategy and beyond. We have taken our own assumption wherever required
- There are limited information's available in the public domain relating to the OLA corporate strategy, investors, future plans, portfolio performance etc.
- The data and the insights collected are purely from the secondary research. There are be differences from reality as there isn’t much consistency in the publicly available research reports.
- OLA, OLACABS, ANI Technologies are interchangeably used in the report to represent OLA Corporate
OLA Corporate IntroductionCompany: Ola Cabs
Year founded: 2010
Headquarter: Bengaluru, India
Number of Employees (Dec 2018) : 8,134
Type: Private
Valuation (May 2019): $6.2 Billion
Annual Revenue (FY2018): Rs 2,222.6 crores
OLA Business Portfolio
OLA Three Horizon Framework
Ride hailing – Market Overview
Insights - India Ride sharing Market outlook
- The Indian ride-sharing and taxi segment is forecast to grow at a CAGR of ~20% during 2020-24, driven by increasing consumer need for flexible and cheaper, but more comfortable travel options. The number of vehicles in fleets is projected to increase from 1.4 million to more than 4 million by 2024. However, growth is likely to slow down in 2020 on account of the COVID-19 pandemic
- Among the sub-segments, the dynamic shuttle segment is expected to grow at the fastest pace, followed by P2P car sharing; while MaaS and corporate sharing will emerge as the new segments in the coming years
- As per industry surveys and studies, more than 50% of Indian consumers prefer using ride-sharing services instead of using their own vehicles. This is higher than China, US, Germany and Japan, where the percentage of consumers using ride-sharing instead of own vehicles are 53%, 29%, 32% and 31%, respectively.
- Key factors driving growth include increasing smartphone and internet penetration, rising fuel prices, parking problems and rising cost of vehicle ownership; while governmental regulations is a major deterrent
- Increasing urban road congestion level is an important factor contributing to the growth of the Indian shared mobility market. Rising population in major cities across the country has led to an increased number of daily commuters which is helping the ride sharing segment.
- In 2018, the daily number of shared rides accounted for 3.5 million which will be increased to 11 million rides daily in 2025
- With rising popularity of ride-sharing platforms among the young generation, about 17-20% of cars is expected to be sold to fleet owners and taxi operators in India, according to industry experts
- The Indian Government is considering a proposal to cap the commissions on app-based ride-hailing firms, such as Uber and Ola, to a total of 10% of the full fare compared to the existing 20%. Such a move could reduce ride revenues by a total of 50% impacting most stakeholders.
- The Indian government also wants to cap ride-hailing drivers to a maximum of 12 hours per day as part of its initiative to increase safety. The government fears that longer hours could jeopardize passengers’ safety.
SWOT Analysis
OLA Business Model Canvas
Is Company's portfolio of businesses make economic sense?
- Ola Ride hailing – Ride hailing CAGR @20% during the year 2020-24. more than 50% of Indian consumers prefer using ride-sharing services instead of using their own vehicles
- Ola Cabs accounted for almost 72.44% of the total revenue generated by the online taxi services market in India, In FY 2019
- During the FY 2019–FY 2023 period, the Mobile wallet CAGR is ~52% by volume. The Indian e-commerce market is expected to expand at a CAGR of ~41% during the 2018-2023 period.
- India Online Food Delivery Market will be US$ 21.41 Billion by 2026, from US$ 4.66 Billion in 2020. It will grow at a CAGR of 28.94% during 2020-2026
- Overall while looking at the overall corporate business modal, portfolios of business and the industry growth projections justifies that the OLA company’s portfolio of business make economic sense. They are providing superior value to customer through the entire value chain. At the same time, OLA is making money from each touch points.
company’s mode of growth (Alliances, Acquisitions, internal development)
- Ola Cabs accounted for almost 72.44% of the total revenue generated by the online taxi services market in India, In FY 2019.
- Ola established alliances with corporates and fleet operators, financial institutions, other travel services etc for increasing the share of wallet
- Ola aggressively acquired over 9 firms for building the capabilities so far. This helped them to go to market in a fast-paced manner.
- Ola started as a technology company and build lots of products and services. Eventually they are becoming a manufacturing company. This transition is enabled through innovation, research and new product developments
- All the existing and new products are related products which are complementing each other to gain more market share. In the same way, Ola is able to aggressively take the existing products to the new markets.
- The company's extensive geographical reach within India (152 cities), coupled with its wide range of related services has helped the company to fetch such a high market share. We agree with the company’s mode of growth.
What should the company do to strengthen/sustain its corporate value
- Invest sufficient capital and talent in large initiatives : Ola EV initiatives and EV vehicle business are large initiatives. Invest sufficient capital, technologies and resources in these key programs.
- Construct a portfolio of initiatives whose returns exceed the cost of capital : Ola is simultaneously making multiple bets in the related business. Also, Ola is making some risky bets like E-mobility which has the potential to yield high rewards. If this entire portfolio of strategic initiatives earns more than its aggregate cost of capital, the company can expect to create value over the long term.
- Dynamically reallocate capital and talent to high-value initiatives : Ride hailing resources can be leveraged for food delivery, grocery delivery and Courier Service . Allocate cash reserve from Ola money to high-valued new initiatives like E-mobility. The new fund has to be sought for expanding the business to other potential GEOs.
- Generate value for all stakeholders – Long-term-oriented companies focus on improving outcomes for all their stakeholders, not just those who own shares in the business. Ola should rely on environmental, social, and governance (ESG) initiatives to address the needs of Ola’s stakeholders. Ola’s initiatives and investment in E-mobility, investment in rural development from Ola foundation, committed employee stock option (~400cr.for employee benefit program), EV technologies towards climate change are some of the strategic long-term initiatives and should be continued
- Staying the long-term course by resisting the temptation to take actions that boost short-term profits
Do you suggest any new additions/divestments
Recommended Additions: Autonomous Vehicle (Self – Drive cars), Air Travel (helicopter, passenger drones), Courier Service)
Recommended Divestment: watch Ola Food delivery and cloud kitchen portfolio for sometime and take decision. this business is not helping neither top line nor bottom line
If You are recommending new businesses to be added, how should the company’s leadership go about building any new businesses
The leadership team should focus on building the right set of capabilities by investing in the right resources and human capital along with a robust research and development team. Company should continue to do acquisition, alliance and Merger in line with the company strategy
Leaders should evaluate the new business ideas based on core adjacencies approach. For example, consider Courier Service, Ola leadership should evaluate the case using adjacency framework and take decision
- Is the adjacency building on and reinforcing our core?
- How critical is our core competence to the customer in this adjacency market?
- How robust is the profit pool of the adjacency?
- What are the chances of becoming leader in this adjacency? (Competitive dynamics; industry structure; compelling value proposition?
- Does this adjacency offer us option value – lead to other moves that in total are essential to protect our core or grow our core?
- Is this adjacency essential to build a defensive position to prevent attack on our core?
- What is the economic distance from our core?
- Does this adjacency help us hedge against any major uncertainty?
Summary
- Ola has tapped the right kind of strategy at the right time to achieve a reasonable market share in the Indian market.
- Ola has diversified portfolio over the past few years by adding in new services like Ola Money, FoodPanda, E-Mobility & Used cars etc.
- Ola has taken a step forward to become a global company by having presence in countries like the United Kingdom, Australia & NewZeland. They have plans of expansion further in other parts of the world.
References
https://bstrategyhub.com/business-model-of-ola-how-does-ola-make-money/amp
https://www.linkedin.com/pulse/india-food-delivery-market-evolution-road-ahead-ankit-arora
https://www.marketresearch.com/Netscribes-India-Pvt-Ltd-v3676/Mobile-Wallet-India-12379988
https://www.techsciresearch.com/report/india-mobile-wallet-market/3796.html
